Was Alexandra Ocasio-Cortez Right Or Wrong?

Congresswoman-elect Alexandria Ocasio-Cortez is being roundly criticized for this recent tweet:

$21 TRILLION of Pentagon accounting errors, Medicare for All costs — $32 trillion. That means 66% of Medicare for All could have been funded already by the Pentagon.

El Borde [CC BY 3.0]Before we get to the substance of her contention, please keep in mind that a tweet is, by definition, very short, while the issues she raised are somewhat complex.

There are three serious problems with Ocasio-Cortez’s statement. First, she’s comparing $21 trillion of Pentagon accounting errors made over an unspecified period and Medicare for All spending of $32 billion over ten years.

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Second, the estimate for Medicare for All spending is based on a highly inflated cost estimate. Two years ago a malpracticing academic had made the erroneous assumption that the annual cost of Medicare for All would be exactly the same $3.2 trillion as our amazingly inefficient healthcare system.

And third, she has focused on accounting errors rather than on wasteful defense spending, which happen to be even higher.

If Ms. Ocasio-Cortez had not attempted to do this relatively complex analysis within the confines of a tweet, she might have better supported her contention that we could finance Medicare for All simply by eliminating the waste embedded in our current healthcare system and in defense spending.

Our defense establishment – which includes not just the Defense Department, but a vast array of private contractors, sixteen or seventeen spy agencies, and our Department of Homeland Security – spends well over one trillion a year. How much of this is waste and funding for highly unlikely military contingencies? My guess is at least half – which comes to over $500 billion.

Our nation’s annual healthcare bill now totals $3.5 trillion. At least one quarter of that is due to ridiculously high administrative costs, and hundreds of billions more to inflated prescription drug prices, hospital charges, and other medical costs. Our healthcare costs almost twice as much per capita as it does in virtually every other rich nation.

If we were to go to a Medicare for All healthcare system, we could cut our national healthcare bill nearly in half. That is how we could finance Medicare for All, while reducing our annual healthcare bill to, say $1.8 trillion.

Now, if you want to toss in the more than $500 billion that we’d save by eliminating the waste in defense spending and use this money to further subsidize our nation’s healthcare, then we could reduce that bill to just $1.3 trillion.

Ocasio-Cortez is certainly on to something very big, so she might have been much better served by using a much less confining forum, such as the one I’m using.

Author: Steve SlavinSteve Slavin has a PhD in economics from NYU, and taught for over thirty years at Brooklyn College, New York Institute of Technology, and New Jersey’s Union County College. He has written sixteen math and economics books including a widely used introductory economics textbook now in its eleventh edition (McGraw-Hill) and The Great American Economy(Prometheus Books) which was published last August.
Email - steveslavin@cs.com